Fooled by Randomness by Nassim Taleb

In the long run, acute successful randomness fools will run out of luck and after years of success will have one devastating quarter where they lose everything in one huge blow up

Induction – infer things about the nature of the world based on our observations. This approach leads to problems as one disconfirming piece of evidence (one black swan) makes the long held belief that all swans are white incorrect

Can never be sure any theory is correct. Always consider the possibility that your theories and assumptions may be proved wrong and examine how such a development would affect your portfolio

The past blowups were always surprises, as all future ones will be as well. Just because it hasn’t happened before, doesn’t mean that it won’t

Path dependent outcome – things sometimes end up as is because of luck or randomness (QWERTY), not because it is optimal

Going the extra mile is disproportionately rewarded but without visible progress, most people give up before they succeed

Human brain not built to accurately forecast or think about probabilities

People get attached to things they already own but we should be able to accept change in our minds when presented with enough evidence

Capability for rational reason can easily be overwhelmed by emotions

We are inherently poor at understanding the impact of rare events

The opposite but more enduring trading strategy is betting on rare, unlikely events with a big payoff should they occur. Although a market crash might be unlikely, it can still be worth betting on it if the possible reward in such an event is large enough

If we are to be fooled by randomness, make it the best kind and work to your advantage

In the face of randomness, act as stoics would – no self-pity, show personal elegance, don’t blame others and don’t complain